Hi Nathan, think of RAW as your image before things like sharpening, contrast, white balance and noise reduction have been applied. So you open it in your converter program and basically get to tweak all these settings.

The idea is that you're working on raw data which hasn't been touched yet, so you'll get a better result than tweaking a JPEG which has already been processed.

RAW files also tend to have a slightly higher tonal range to play with AND they haven't been losslessly compressed yet, so when you've processed them, you can save them with as little or as much compression as you like. This allows you to avoid the compression artefacts seen on most JPEGs.

PS - and Graham's right, most DSLRs come with software to convert RAW files, but they may not be as powerful as third party or non-free solutions.

There's a free RAW converter/editor called Therapee (sorry you'll have to Google it) that's similar to GIMP in that it's experimental. I can't use it because my computer's too old and slow, but it seems to have lots of features.

The GIMP nor RawTherapee are no longer really experimental, the GIMP has grown to be very solid, RawTherapee only misses a couple of features but its conversion quality is usually excellent. You might need to fiddle with the default settings and perhaps save your own presets if you like them, but even though it says it's experimental on its website, I don't think it's true anymore. I've been using it for a while now and it's great.